The country’s market regulator SEBI has accepted the government’s request to reclassify its shares in IDBI Bank as “public” after the stake sale. This is according to a regulatory filing by IDBI Bank on January 5. IDBI Bank, in the filing, attached a letter received from the Securities and Exchange Board of India (SEBI) dated January 3, 2023.
According to the letter, SEBI has accepted reclassification on a few conditions. SEBI said that the government’s voting rights would have to be capped at 15 per cent, the government would not exercise any control over the affairs of the bank, and it will not be represented on its board of directors.
“The intention of Gol to get its shareholding re-classified as public holding shall be specified in the letter of offer dispatched to the shareholders of IDBI Bank in connection with the open offer made by the new acquirer,” SEBI’s letter further stated.
The Department of Investment and Public Asset Management (DIPAM) on behalf of the government had requested SEBI for these relaxations in December 2022. DIPAM is the nodal agency for divestments.
The government and LIC together hold nearly 95 per cent of IDBI Bank, of which 45.48 per cent is owned by the government and 49.24 per cent by the LIC. It has invited bids for the sale of a 60.72 per cent stake in IDBI Bank. The government is looking to offload 30.48 per cent of the stake, whereas, the remaining 30.24 percent will be sold by the LIC. Following the stake sale, its shareholding will be reduced to 15 percent.
The government had also requested SEBI to treat its residual stake in IDBI Bank as a financial investment after the sale, as it would not exercise any control over the bank.
Additionally, SEBI has directed the new acquirer to comply with minimum public shareholding norms within one year of the sale.
SEBI mandates a minimum of 25 per cent shareholding for all the listed entities within three years of listing, excluding state-owned companies. Reclassification of the government’s remaining 15 per cent shareholding in IDBI as “public” will make it easier for the new buyers to meet the mandated 25 per cent shareholding norm.